We’re heading for economic dictatorship

by Janet Daley via the Ludwig von Mises Institute of Canada (originally posted on The Telegraph)
November 27, 2012

Forget about that dead parrot of a question – should we join the eurozone? The eurozone has officially joined us in a newly emerging international organisation: we are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America).

So here we all are. Like us, the member nations of the European single currency have embarked on their very own double (or is it triple?) dip recession. This is the future: the long, meandering “zig-zag” recovery to which the politicians and heads of central banks allude is just a euphemism for the end of economic life as we have known it.

Now there are some people for whom this will not sound like bad news. Many on the Left will finally have got the economy of their dreams – or, rather, the one they have always believed in. At last, we will be living with that fixed, unchanging pie which must be divided up “fairly” if social justice is to be achieved. Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking anything away from any other group, there will indeed be an absolute limit on the amount of capital circulating within the society.

The only decisions to be made will involve how that given, unalterable sum is to be shared out – and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal – virtually the only – significant function of political life. Is this Left-wing heaven?

Well, not quite. The total absence of economic growth would mean that the limitations on that distribution would be so severe as to require draconian legal enforcement: rationing, limits on the amount of currency that can be taken abroad, import restrictions and the kinds of penalties for economic crimes (undercutting, or “black market” selling practices) which have been unknown in the West since the end of the Second World War.

In this dystopian future there would have to be permanent austerity programmes. This would not only mean cutting government spending, which is what “austerity” means now, but the real kind: genuine falls in the standard of living of most working people, caused not just by frozen wages and the collapse in the value of savings (due to repeated bouts of money-printing), but also by the shortages of goods that will result from lack of investment and business expansion, not to mention the absence of cheaper goods from abroad due to import controls.

And it is not just day-to-day life that would be affected by the absence of growth in the economy. In the longer term, we can say good-bye to the technological innovations which have been spurred by competitive entrepreneurial activity, the medical advances funded by investment which an expanding economy can afford, and most poignantly perhaps, the social mobility that is made possible by increasing the reach of prosperity so that it includes ever-growing numbers of people. In short, almost everything we have come to understand as progress. Farewell to all that. But this is not the end of it. When the economy of a country is dead, and its political life is consumed by artificial mechanisms of forced distribution, its wealth does not remain static: it actually contracts and diminishes in value. If capital cannot grow – if there is no possibility of it growing – it becomes worthless in international exchange. This is what happened to the currencies of the Eastern bloc: they became phoney constructs with no value outside their own closed, recycled system.

When Germany was reunified, the Western half, in an act of almost superhuman political goodwill, arbitrarily declared the currency of the Eastern half to be equal in value to that of its own hugely successful one. The exercise nearly bankrupted the country, so great was the disparity between the vital, expanding Deutschemark and the risibly meaningless Ostmark which, like the Soviet ruble, had no economic legitimacy in the outside world.

At least then, there was a thriving West that could rescue the peoples of the East from the endless poverty of economies that were forbidden to grow by ideological edict. It remains to be seen what the consequences will be of the whole of the West, America included, falling into the economic black hole of permanent no-growth. Presumably, it will eventually have to move towards precisely the social and political structures that the East employed. As the fixed pot of national wealth loses ever more value, and resources shrink, the measures to enforce “fair” distribution must become more totalitarian: there will have to be confiscatory taxation on assets and property, collectivisation of the production of goods, and directed labour.

Democratic socialism with its “soft redistribution” and exponential growth of government spending will have paved the way for the hard redistribution of diminished resources under economic dictatorship. You think this sounds fanciful? It is just the logical conclusion of what will seem like enlightened social policy in a zero-growth society where hardship will need to be minimised by rigorously enforced equality. Then what? The rioting we see now in Italy and Greece – countries that had to have their democratic governments surgically removed in order to impose the uniform levels of poverty that are made necessary by dead economies – will spread throughout the West, and have to be contained by hard-fisted governments with or without democratic mandates. Political parties of all complexions talk of “balanced solutions”, which they think will sound more politically palatable than drastic cuts in public spending: tax rises on “the better-off” (the only people in a position to create real wealth) are put on the moral scale alongside “welfare cuts” on the unproductive.

This is not even a recipe for standing still: tax rises prevent growth and job creation, as well as reducing tax revenue. It is a formula for permanent decline in the private sector and endless austerity in the public one. But reduced government spending accompanied by tax cuts (particularly on employment – what the Americans call “payroll taxes”) could stimulate the growth of new wealth and begin a recovery. Most politicians on the Right understand this. They have about five minutes left to make the argument for it.

War – Some observations

“Preventive war was an invention of Hitler. Frankly, I would not even listen to anyone seriously that came and talked about such a thing.”
– Dwight D. Eisenhower

“We will bankrupt ourselves in the vain search for absolute security.”
– Dwight D. Eisenhower

“How far can you go without destroying from within what you are trying to defend from without?”
–Dwight D. Eisenhower

“Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.”
– Dwight D. Eisenhower

“As Americans mindlessly celebrate another Memorial Day with cookouts, beer and burgers, the U.S. war machine keeps churning. As we brutally enforce our will on foreign countries, we create more people that hate us. They don’t hate us for our freedom. They hate us because we have invaded and occupied their countries. They hate us because we kill innocent people with predator drones. They hate us for our hypocrisy regarding democracy and freedom. Just when we had the opportunity to make a sensible decision by leaving Iraq and exiting the Middle East quagmire, Obama made the abysmal choice to casually sacrifice more troops in the Afghan shithole. We have thrown over $1.3 trillion down Middle East rat holes over the last 11 years with no discernible benefit to the citizens of the United States. George Bush and Barack Obama did this to prove  they were true statesmen. The Soviet Union killed over 1 million Afghans, while driving another 5 million out of the country and retreated as a bankrupted and defeated shell after ten years. Young Americans continue to die, for whom and for what? Our foreign policy during the last eleven years can be summed up in one military term, SNAFU – Situation Normal All Fucked Up. These endless foreign interventions under the guise of a War on Terror are a smoke screen for what is really going on in this country. When a government has unsolvable domestic problems, they try to distract the wilfully ignorant masses by proactively creating foreign conflicts based upon false pretences.”
– Jim Quinn, The Burning Platform, May 27, 2012, excerpt article, “War Pigs – The Fall of a Global Empire”

“I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within.”
– General Douglas MacArthur

“What kind of a civilized society allocates 44% of the taxes taken from its people to war? Only 2.5% of your taxes go to science, energy, and environment. Only 2.2% of your taxes go to education and jobs. You produce the results that you would expect from your investments. A full 13% of our population doesn’t have a high school diploma (20% of African Americans and 43% of Latinos) and only 30% have a college degree. How do we expect to lead the world in technology and research with these figures? But we do lead the world in government issued student loan debt with $1 trillion and rising.”
– Jim Quinn, The Burning Platform, May 27, 2012, excerpt article, “War Pigs – The Fall of a Global Empire”

“The military don’t start wars. Politicians start wars.”
– General William Westmoreland

“I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity.”
– Dwight D. Eisenhower

“My first wish is to see this plague of mankind, war, banished from the earth.”
– George Washington

“The world has achieved brilliance without wisdom, power without conscience. Ours is a world of nuclear giants and ethical infants. We know more about war than we know about peace, more about killing than we know about living.”
– General Omar Bradley

“He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would suffice.”
– Albert Einstein

The third president (1743 – 1826) of the United States, a man who towered above all

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
–Thomas Jefferson

“A private central bank issuing the public currency is a greater menace to the liberty of the people than a standing army.”
–Thomas Jefferson

“I do not take a single newspaper, nor read one a month, and I feel myself infinitely the happier for it.”
–Thomas Jefferson

“The man who reads nothing at all is better educated than the man who reads nothing but newspapers.”
–Thomas Jefferson

“Paper is poverty, it is only the ghost of money, and not money itself.”
–Thomas Jefferson

“The spirit of resistance to government is so valuable on certain occasions, that I wish it always to be kept alive.”
–Thomas Jefferson

“The will of the people is the only legitimate foundation of any government, and to protect its free expression should be our first object.”
–Thomas Jefferson

“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.”
–Thomas Jefferson

“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”
–Thomas Jefferson

“I have the consolation of having added nothing to my private fortune during my public service, and of retiring with hands clean as they are empty.”
–Thomas Jefferson, letter to Count Diodati, 1807

“No government ought to be without censors and where the press is free, no government ever will.”
–Thomas Jefferson, letter to George Washington, September 9, 1792

“An honest man can feel no pleasure in the exercise of power over his fellow citizens.”
–Thomas Jefferson, letter to John Melish, January 13, 1813

“Some men look at constitutions with sanctimonious reverence, and deem them like the ark of the covenant, too sacred to be touched.”
–Thomas Jefferson, Resolutions, 1803

“Experience has shown that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”
– Thomas Jefferson

” I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.”
–Thomas Jefferson, to Archibald Stuart, 1791

“No nation is permitted to live in ignorance with impunity.”
–Thomas Jefferson

Malo periculosam libertatem quam quietam servitutem. (“I prefer the tumult of liberty to the quiet of servitude”)
–Thomas Jefferson to James Madison, 30 January 1787.